Articles tagged with: Long term care

How much does eldercare cost, and how do you arrange it when it is needed? The average person might have difficulty answering those two questions, for the answers are not widely known. For clarification, here are some facts to dispel some myths.

True or false: Medicare will pay for your mom or dad’s nursing home care.

FALSE, because Medicare is not long-term care insurance.1

Part A of Medicare will pay the bill for up to 20 days of skilled nursing facility care – but after that, you or your parents may have to pay some costs out-of-pocket. After 100 days, Medicare will not pay a penny of nursing home costs – it will all have to be paid out-of-pocket, unless the patient can somehow go without skilled nursing care for 60 days or 30 days including a 3-day hospital stay. In those instances, Medicare’s “clock” resets.2

True or false: a semi-private room in a nursing home costs about $35,000 a year.

FALSE. According to Genworth Financial’s most recent Cost of Care Survey, the median cost is now $85,775. A semi-private room in an assisted living facility has a median annual cost of $45,000 annually. A home health aide? $49,192 yearly. Even if you just need someone to help mom or dad with eating, bathing, or getting dressed, the median hourly expense is not cheap: non-medical home aides, according to Genworth, run about $21 per hour, which at 10 hours a week means nearly $11,000 a year.3,4

True or false: about 40% of today’s 65-year-olds will eventually need long-term care.

FALSE. The Department of Health and Human Services estimates that close to 70% will. About a third of 65-year-olds may never need such care, but one-fifth are projected to require it for more than five years.5

True or false: the earlier you buy long-term care insurance, the less expensive it is.

TRUE. As with life insurance, younger policyholders pay lower premiums. Premiums climb notably for those who wait until their mid-sixties to buy coverage. The American Association for Long-Term Care Insurance’s 2018 price index notes that a 60-year-old couple will pay an average of $3,490 a year for a policy with an initial daily benefit of $150 for up to three years and a 90-day elimination period. A 65-year-old couple pays an average of $4,675 annually for the same coverage. This is a 34% difference.6

True or false: Medicaid can pay nursing home costs.

TRUE. The question is, do you really want that to happen? While Medicaid rules vary per state, in most instances a person may only qualify for Medicaid if they have no more than $2,000 in “countable” assets ($3,000 for a couple). Countable assets include bank accounts, equity investments, certificates of deposit, rental or vacation homes, investment real estate, and even second cars owned by a household (assets held within certain trusts may be exempt). A homeowner can even be disqualified from Medicaid for having too much home equity. A primary residence, a primary motor vehicle, personal property and household items, burial funds of less than $1,500, and tiny life insurance policies with face value of less than $1,500 are not countable. So yes, at the brink of poverty, Medicaid may end up paying long-term care expenses.4,7

Sadly, many Americans seem to think that the government will ride to the rescue when they or their loved ones need nursing home care or assisted living. Two-thirds of people polled in another Genworth Financial survey about eldercare held this expectation.4

In reality, government programs do not help the average household pay for any sustained eldercare expenses. The financial responsibility largely falls on you.

A little planning now could make a big difference in the years to come. Call or email an insurance professional today to learn more about ways to pay for long-term care and to discuss your options. You may want to find a way to address this concern, as it could seriously threaten your net worth and your retirement savings.

Mike Moffitt may be reached at ph#641-782-5577 or email: mikem@cfgiowa.com.

Website: www.cfgiowa.com

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Michael Moffitt is a Registered Representative with and Securities are offered through LPL Financial, Member FINRA/SIPC. Investments advice offered through Advantage Investment Management (AIM), a registered investment advisor. Cornerstone Financial Group and AIM are separate entities from LPL Financial.

You can prepare for your retirement transition years before it occurs. In doing so, you can do your best to avoid the kind of financial surprises that tend to upset an unsuspecting new retiree.

How much monthly income will you need? Look at your monthly expenses and add them up. (Consider also the trips, adventures and pursuits you have in mind in the near term.) You may end up living on less; that may be acceptable, as your monthly expenses may decline. If your retirement income strategy was conceived a few years ago, revisit it to see if it needs adjusting. As a test, you can even try living on your projected monthly income for 2-3 months prior to retiring.

Should you try to go Roth? Many pre-retirees have amassed substantial retirement savings in tax-deferred retirement accounts such as 401(k)s, 403(b)s and traditional IRAs. Distributions from these accounts are taxed as ordinary income. This reality makes some pre-retirees weigh the pros and cons of a Roth IRA or Roth 401(k) conversion for some or all of those assets. You may want to consider the “Roth tradeoff” – being taxed on the amount of retirement savings you convert today in exchange for the ability to take tax-free withdrawals from the Roth IRA or 401(k) tomorrow. (You must be 59½ and have owned that Roth account for at least five years to take tax-free distributions.)1

Should you downsize or relocate? Moving to another state may lessen your tax burden. Moving into a smaller home may reduce your monthly expenses. In a perfect world, you would retire without any mortgage debt. If you will still be paying off your home loan in retirement, realize that your monthly income might be lower as you do so. You may want to investigate a refi, but consider that the cost of a refi can offset the potential savings down the line.

How conservative should your portfolio be? Even if your retirement savings are substantial, growth investing gives your portfolio the potential to keep pace with or keep ahead of rising consumer prices. Mere gradual inflation has the capability to erode your purchasing power over time. As an example, at 3% inflation what costs $10,000 today will cost more than $24,000 in 2045.2

In planning for retirement, the top priority is to build savings; within retirement, the top priority is generating consistent, sufficient income. With that in mind, portfolio assets may be adjusted or reallocated with respect to time: it may be wise to have some risk-averse investments that can provide income in the next few years as well as growth investments geared to income or savings objectives on the long-term horizon.

How will you live? There are people who wrap up their careers without much idea of what their day-to-day life will be like once they retire. Some picture an endless Saturday. Others wonder if they will lose their sense of purpose (and self) away from work. Remember that retirement is a beginning. Ask yourself what you would like to begin doing. Think about how to structure your days to do it, and how your day-to-day life could change for the better with the gift of more free time.

Many retirees find that their expenses “out of the gate” are larger than they anticipated – more travel and leisure means more money spent. Even so, no business owner or professional wants to enter retirement pinching pennies. If you want to live it up a little yet are worried about drawing down your retirement savings too fast, consider slimming transportation costs (car and gasoline expenses; maybe you could even live car-free), landscaping costs, or other monthly costs that amount to discretionary spending better suited to youth or mid-life.

How will you take care of yourself? What kind of health insurance do you have right now? If your company sponsors a group health plan, you may as well get the most out of it (in terms of doctor, dentist and optometrist visits) before you leave the office.

If you retire prior to age 65, Medicare will not be there for you. Check and see if your group health plan will extend certain benefits to you when you retire; it may or may not. If you can stay enrolled in it, great; if not, you may have to find new coverage at presumably higher premiums.

Even if you retire at 65 or later, Medicare is no panacea. Your out-of-pocket health care expenses could still be substantial with Medicare in place. Long term care is another consideration – if you think you (or your spouse) will need it, should it be funded through existing assets or some form of LTC insurance?

Give your retirement strategy a second look as the transition approaches. Review it in the company of the financial professional who helped you create and refine it. An adjustment or two before retirement may be necessary due to life or financial events.

Mike Moffitt may be reached at ph# 641-782-5577 or email: mikem@cfgiowa.com

Website: www.cfgiowa.com

Michael Moffitt is a Registered Representative with and Securities are offered through LPL Financial, Member FINRA/SIPC. Investments advice offered through Advantage Investment Management (AIM), a registered investment advisor. Cornerstone Financial Group and AIM are separate entities from LPL Financial.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

A helping hand for a pressing need. With the baby boom generation maturing, numerous studies and articles have pointed out the rising need for long term care. Some state governments have directly responded to it.

Now, many states have created partnership programs to encourage their residents to purchase LTC insurance coverage. It only makes sense: if more people opt to privately insure themselves, a state will face less of a burden and less liability when it comes to its own eldercare programs and eldercare costs.

How the partnership plans work. Essentially, these plans provide dollar-for-dollar asset protection when you buy an LTC policy. So for every dollar the policy pays out in benefits, you get an equal dollar amount in asset protection under a state’s Medicaid spend-down regulations.

What does this mean for you? It means that you are able to retain assets you would otherwise have to spend down before you could qualify for state Medicaid benefits.

These partnership plans let you protect an amount of funds equal to the amount the policy pays out in benefits and still qualify for state Medicaid assistance (as long as you have used up all policy benefits and still require long term care).

Typically, Medicaid kicks in only when you are destitute. But with these partnership programs, you don’t have to be destitute to receive state assistance, even if your need for care outlasts your LTC policy benefits.

With these programs in place, LTC insurance seems more and more attractive. That’s important, because it has never seemed as essential as it does today.

Does your LTC policy qualify for a partnership plan? You should find out if it does. Most LTC policies sold today do qualify for these partnership plans. A key factor is whether a policy has an age-related inflation protection benefit. In these policies, your daily or monthly LTC benefit amount is adjusted upward in response to inflation and increased cost of expenses. With these inflation-adjusted policies, your benefits typically go up each year, but your premiums may not.

There’s really not much incentive for state governments to partner with LTC policyholders whose policies aren’t inflation-adjusted. What would happen is that with each passing year, the odds would rise of the policyholder using up the whole LTC benefit and leaning on a state Medicaid program, so the state would be poised to pick up more and more of the cost of eldercare with the passage of time.

The Ohio example. Consider the State of Ohio’s Partnership for Long-Term Care Insurance, and the need it meets. In 2007, the average annual cost of a private or semi-private room in a nursing home exceeded $60,000 in Ohio, and the cost for a licensed, Medicare-certified home health aide was nearly $52,000 per year (for 50 hours of care per week).1

Here’s the kind of difference the Ohio partnership plan could make for an Ohio resident. As an hypothetical example, let’s say Mr. and Mrs. Jones in Toledo have a $100,000 LTC policy. Once they use up their $100,000 policy benefit, they have to spend down their assets to $2,250 before they can get state Medicaid benefits. But if they exhaust a $100,000 partnership policy, they can potentially qualify for Medicaid coverage and still hang on to $101,500 of their assets.2

In Ohio, if you bought your current LTC policy after August 12, 2002, your insurer must offer you the choice of exchanging it for a partnership-compatible policy. You have 90 days to decide if you want to do that.3 Ohio also offers state residents free, in-home long term care consultations.

What kind of long term care coverage do you have? Do you have a policy that is eligible for a partnership plan? Do you have any LTC policy at all? It is wise to look into this. It may be essential for your long-range financial well-being. I urge you to speak with a qualified insurance advisor or financial professional today about long term care coverage, and these remarkably useful partnership plans.

This was prepared by Peter Montoya Inc., not the named Representative nor Broker/Dealer, and should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information.

Michael Moffitt is a Registered Representative with and Securities are offered through LPL Financial, Member FINRA/SIPC. Investments advice offered through Advantage Investment Management (AIM), a registered investment advisor. Cornerstone Financial Group and AIM are separate entities from LPL Financial.

With the cost of long term care insurance rising, they are gaining attention.

Could these products answer a financial dilemma? Many high net worth households worry about potential long term care expenses, but they are reluctant or unable to buy long term care insurance. According to a 2014 report from the Robert Wood Johnson Foundation, less than 8% of U.S. households have purchased LTCI.1

Long term care insurance (LTCI) policies have a “use it or lose it” aspect of the coverage: if the insured party dies abruptly, all those insurance premiums will have been paid for nothing. If the household is wealthy enough, maybe it can forego buying a LTC policy and absorb some or all of possible LTC costs using existing assets.

Are there alternatives allowing some flexibility here? Yes. Recently, more attention has come to hybrid LTC policies and hybrid LTC annuities. These are hybrid insurance products: life insurance policies and annuities with an option to buy a long term care insurance rider for additional cost. They are gaining favor: sales of hybrid LTC policies alone rose by 24% in 2012, according to the American Association for Long-Term Care Insurance’s 2014 LTCi Sourcebook. Typically, the people most interested in these hybrid products are a) wealthy couples concerned about the increasing costs of traditional LTCI coverage, b) annuity holders outside of their surrender period who need long term care coverage. Being able to draw on LTCI if the moment arises can be a relief.2

They can be implemented with a lump sum. Often, assets from a CD or a savings account are used to fund the annuity or life insurance policy (the policy is often single-premium). In the case of a hybrid LTC policy, the bulk of the policy’s death benefit can be tapped and used as LTC benefits if the need arises. In the case of a hybrid LTC annuity, the money poured into the annuity is usually directed into a fixed-income investment, with the immediate or deferred annuity payments increasing if the annuity holder requires LTC.2,3

What if the annuity or policy holder passes away suddenly, or dies with LTC benefits left over? If that happens with a hybrid LTC policy, you still have a life insurance policy in place. His or her heirs will receive a tax-free death benefit. It is also possible in certain cases to surrender the policy and even get the initial premium back, however you must have a “Return of Premium” rider in place, which comes as an additional cost to the policy. The annuity holder, of course, names a beneficiary – and if he or she doesn’t need long term care, there is still an immediate or deferred income stream from the annuity contract.3

There are some trade-offs for the LTC coverage. Costs of these products are usually defined by the insurer as “guaranteed” – LTCI premiums are fixed, and the value of the policy or annuity will never be less than the lump sum it was established with (though a small surrender charge might be levied in the first few years of the annuity). In exchange for that, some hybrid LTC policies accumulate no cash value, and some hybrid LTC annuity products offer less than fair market returns.4

Tax-free withdrawals may be used to pay for LTC expenses. Thanks to the Pension Protection Act of 2006, the following privileges were granted regarding hybrid insurance products:

*All claims paid directly from appreciated hybrid LTC annuities and hybrid LTC policies are income tax free so long as they are used to pay qualified long term care expenses. In using the cash value to cover LTC expenses, you are not triggering a taxable event.2,4

*Owners of traditional life insurance policies and annuities are now allowed to make 1035 exchanges into appropriate hybrid LTC products without incurring taxable gains.2

If you shop for a hybrid insurance product, shop carefully. The first hybrid LTC policy or hybrid LTC annuity you lay eyes on may not be the cheapest, so look around before you leap and make sure the product is reasonably tailored to your financial objectives and needs. Remember that annuity contracts are not “guaranteed” by any federal agency; the “guarantee” is a pledge from the insurer. If you decide to back out of these arrangements, you need to know that some insurers will not return your premiums. Also, keep in mind that over the long run, the return on these hybrid products will likely not match the return on a conventional fixed annuity or LTCI policy; actuarially speaking, when interest rates rise there is no incentive for the insurer to adjust the fixed income rate of return in response.2,4

Are hybrid insurance products for you? If you can’t qualify medically for LTCI but still want coverage, they may represent worthy options that you can start with a lump sum. You might want to talk to your insurance or financial consultant about the possibility.

Mike Moffitt may be reached at ph# 641-782-5577 or email: mikem@cfgiowa.com

website: www.cfgiowa.com

Michael Moffitt is a Registered Representative with and Securities are offered through LPL Financial, Member FINRA/SIPC. Investments advice offered through Advantage Investment Management (AIM), a registered investment advisor. Cornerstone Financial Group and AIM are separate entities from LPL Financial.

Life insurance policies contain exclusions, limitations, reductions of benefits, and terms for keeping them in force. Your financial professional can provide you with costs and complete details.

Fixed annuities are long-term investment vehicles designed for retirement purposes. Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. Withdrawals made prior to age 59 ½ are subject to a 10% IRS penalty tax and surrender charges may apply.

Guarantees are based on the claims paying ability of the issuing company.

Riders are additional guarantee options that are available to an annuity or life insurance contract holder. While some riders are part of an existing contract, many others may carry additional fees, charges and restrictions, and the policy holder should review their contract carefully before purchasing.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.